Payment 14.3 / 14.9

FIDIC reference

Sub-Clause 14.3 / 14.9 — Retention Money

The Employer withholds a percentage of each IPC up to a limit; half is released at Taking-Over and the balance after the Defects Notification Period.

Applies in: Red BookYellow BookSilver Book

A retention percentage stated in the Contract Data is deducted from each Interim Payment Certificate (IPC) until it reaches the retention limit. The first half of the accumulated amount is released after the Taking-Over Certificate is issued, and the balance after the Defects Notification Period (DNP) expires and the Performance Certificate is issued. Under the 2017 editions the parties may agree to replace cash retention with a retention bond.

Key points

  • Retention is deducted from each IPC up to the retention limit.
  • Half is released at the Taking-Over Certificate.
  • The balance follows the DNP and the Performance Certificate.
  • 2017: cash retention may be replaced by a retention bond if agreed.

How this works in practice

Retention is the most predictable and simultaneously the most underestimated element of cash flow. The retention percentage, the limit and the two-stage release (at taking over and on the Performance Certificate) are Contract Data entries, and they should be modelled at tender stage: on a three-year project this is a material sum frozen for the duration. The practical problem is the second half. Its release is tied to the Performance Certificate, which in turn depends on closing out all defects — so a register of rectified items signed off by the Engineer converts directly into cash.

Common traps

  • No limit on retention is set, so it grows in proportion to value with no ceiling.
  • Release of the first half is not claimed at taking over: without an application the money stays with the Employer.
  • The contract allows retention to be replaced by a bank guarantee but the option is never used — working capital is frozen for nothing.

Versions: 1999 → 2017 → 2022

  1. 1999

    Deduction at Sub-Clause 14.3, payment of retention at Sub-Clause 14.9; a retention bond was not expressly provided.

  2. 2017

    The same 14.3/14.9 structure plus an explicit retention-bond option and clearer links to the acceptance milestones.

  3. 2022

    The 2022 reprint made no substantive change to retention.

Clause FAQ

Which FIDIC books use Sub-Clause 14.3 / 14.9?

The clause applies in Red Book, Yellow Book, Silver Book. Particular Conditions may change the standard risk allocation, so always check the project contract.

Can retention be replaced by a retention money guarantee?

Yes, where the contract provides for it — usually through a Retention Money Guarantee. The economics are straightforward: the Contractor frees working capital and pays a bank commission that is normally far cheaper than the cost of the frozen capital. Two things to check: whether the Contract Data permits it, and at what point the guarantee must be provided.

When is the second half of retention released?

At the end of the Defects Notification Period, alongside issue of the Performance Certificate. The practical advice is not to wait for the end of the project but to keep a defects register with rectification entries signed off by the Engineer throughout the DNP. By close-out you then hold a document that removes the grounds for delaying release, rather than an argument about what remains outstanding.

Related clauses

14 Clause 14 — Contract Price and Payment 10.1 Sub-Clause 10.1 — Taking-Over Certificate 11 Clause 11 — Defects after Taking Over (DNP)

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Reference material, not legal advice. Always check your contract and the Particular Conditions.